For example, if an individual secures a $30,000 loan for a car, a lender may require them to pay an additional 5% of the loan back, or $1,500 in interest. Institutions that loan money to an entity typically charge interest at a rate that is a percentage of the loan. Interest is the additional money individuals must pay when borrowing money. Sometimes lenders require collateral, which means that the lender and borrower agree that if the borrower does not pay back the loan, known as defaulting, the lender can seize property instead. To take out a loan, an individual typically provides a lending organization with a reason for requesting the funds and includes some of their financial information, such as their credit score and proof of employment. The borrower repays their debt to the lender within a specified period and may pay interest on it. LoanĪ loan is a sum of money or an item that one entity lets another entity borrow. Here are 25 essential financial terms and their definitions: 1. Related: 75 Basic Accounting Terms and Definitions 25 common financial terms to know Similarly, if you're a company leader, you may want to know these terms to manage the business' finances and create financial statements or manage bookkeeping tasks. For example, if you have a role in accounting, finance, sales or a similar field, you may use financial terms daily to complete your tasks and communicate with colleagues and clients. It can also help you stay up to date and aware of current economic news and events.ĭepending on your profession, knowing these terms may also support your career and performance in the workplace. For example, you can utilize your finance knowledge to make informed decisions about taking out loans, renting or buying property or planning for retirement. This knowledge can be especially useful when meeting with industry experts, such as investors and accountants. Knowing finance terms is important because it can help you understand and manage your personal financial health or the financial situation of a business. Why is it important to know financial terms? In this article, we define why it's important to know financial terms and provide a list of 25 concepts and their definitions for you to review. Understanding these concepts can also help you discuss financial topics with coworkers, clients and investors more effectively. These terms can aid your financial decision-making and allow you to stay informed when meeting with a tax accountant or other expert in this field. Most are available in audio as well as print, and some are available via e-reader.Whether you're interested in a career in finance or you want to learn more about your personal finances, there are several terms you can learn to improve your understanding of this field. These are 15 top finance books that fit the bill, each with its unique approach, takeaways and point of view. Bonus if you find a book by an expert who also includes advice from other, reputable experts. Research the author of your title before you commit and make sure they’ve got the chops to back up their claims. A credible expert - There are thousands of personal finance books out there and unfortunately, many of them are written by authors with little to no formal education, training or experience in money management.Actionable advice - While reading stories about other people’s experiences is interesting, it won’t feel relatable if it’s not accompanied by actionable tips that you can put into practice in your own financial life.This increases the odds that the advice will apply to you, not to mention motivate you. Your financial stage - Whether you’re just starting out or trying to rebuild your credit, zero in on a book that addresses the life stage you’re in right now.Your CNN account Log in to your CNN account
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